Bench sold vinyl film to Fasson for decals to identify sea-borne bulk containers. A term required the film to be legible condition for at least five years. Fasson sold them to container manufacturers who supplied the containers marked with the decals to shipping lines. Some became illegible. Fasson brought an action for breach of warranty. The trial judge held that the prima facie measure of damages under section 53(3) had not been displaced and awarded pounds 564,328 damages based on the difference between the value of the goods (measured by the purchase price) at the time of delivery and the value they would have had if the warranty been fulfilled.
Held: (Majority) The Bence’s appeal succeeded. The loss for a latent defect discovered after a sale on, was the Plaintiff’s actual loss. Damages for breach of warranty on sale of goods are to be assessed by the court. The parties had contemplated when the warranty was given (a) that the goods sold would only be used in making a product which would be sold on to customers requiring five year durability; (b) that any defect in the film would not have been detected on delivery or in the process of manufacture; and (c) that, if there was a defect, the end users would claim damages against the container owners, who would claim against the manufacturers, who would claim against the plaintiffs. The damages should be based on the buyer’s liability to the subsequent or ultimate users. The judgment was reduced to pounds 22,000, being the cost of unused and defective material returned to the plaintiffs. The defendants had compensated the plaintiffs for the only claim that had been made on them; and there were no others in prospect.
Otton LJ distinguished Slater because there the sub-sale was of the same goods and the seller did not know of the contemplated sub-sale; In this case the goods were substantially converted or processed by the buyer and the sellers were aware of the precise use to which the film was to be put when the contract was made. He rejected the submission that a conclusion that required the sellers to indemnify the buyers in respect of their liability to sub-purchasers was too ‘nebulous’. Such difficulties of calculation as might arise were irrelevant to the issue that the judge had to decide.
Auld LJ: ‘As to section 53 (3) there is, in my view, a danger of giving it a primacy in the code of section 53 that it does not deserve. The starting point in a claim for breach of warranty of quality is not to determine whether one or other party has ‘displaced’ the prima facie test in that subsection. The starting point is the Hadley v Baxendale principle reproduced in section 53 (2) applicable to a breach of any warranty, namely an estimation on the evidence of ‘the . . loss directly and naturally resulting in the ordinary course of events from the breach of warranty’. The evidence may be such that the prima facie test in section 53 (3) never comes in to play at all.
The Hadley v Baxendale principle is recovery of true loss and no more (or less), namely to put the complaining party, so far as a money can do it, in the position he would have been if the contract had been performed. Where there is evidence showing the nature of the loss that the parties must be taken to have contemplated in the event of breach, it is not to be set aside by applying the prima facie test in section 53 (3) simply because calculation of such contemplated loss would be difficult. Equally, it should not be set aside in that way so as to produce a result where the claimant will clearly recover more than his true loss.
. . Put shortly, and drawing on the analysis of Scarman L.J. in H Parsons (Livestock) Ltd v Uttley Ingham and Co. Ltd (1978) Q.B. 791,807, the sort of question the judge should have asked is: ‘What would the parties have thought about the probable loss to the buyer in the event of a latent defect in film at the time of delivery later causing trouble?’
Judges:
Otton LJ, Auld LJ
Citations:
Gazette 30-Oct-1996, Times 24-Oct-1996, [1996] EWCA Civ 748, [1998] QB 87, [1997] 3 WLR 205, [1997] CLC 373
Links:
Statutes:
Jurisdiction:
England and Wales
Citing:
Distinguished – Slater v Hoyle and Smith Ltd 1920
Cotton cloth was sold. The buyer was to use it to fulfil his own contract with a sub-buyer. The cloth was not of the contractual quality but the buyer was able to perform the sub-contract by delivering the same cloth. The sub-buyers paid the full . .
Cited by:
Cited – Transfield Shipping Inc of Panama v Mercator Shipping Inc of Monrovia ComC 1-Dec-2006
The owners made substantial losses after the charterers breached the contract by failing to redliver the ship on time as agreed.
Held: On the facts found the Owners’ primary claim is not too remote. To the knowledge of the Charterers, it was . .
Lists of cited by and citing cases may be incomplete.
Contract, Damages
Updated: 01 November 2022; Ref: scu.78330